Pugachev five years on: were the trusts really bare trusts?

“Pugachev five years on: Paul Adams has written an article taking a new look at the use of a "True Effect of the Trusts" analysis to give creditors access to trust assets. The Article has been published in Trusts & Trustees.

Abstract

In JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch), Birss J, as he then was, held that certain trusts which conferred wide powers on the settlor were in substance nothing more than bare trusts. This meant that judgment creditors of the settlor could enforce against the trust assets. Despite initial excitement among trusts and civil fraud practitioners, Birss J’s “bare trust” analysis has not been widely adopted in subsequent cases. Five years on, the policy considerations underpinning the decision in Pugachev are as easy to understand as ever, but what of the legal reasoning? Was Birss J right to say that the trusts were bare trusts? Could a better way of making the trust assets available to the settlor’s creditors have been found?

The article is available to subscribers of Trust and Trustees and can be accessed here.